3 Ways Interest Rates Impact Your Home Purchase

By Joe Kipping

Top Realtor Joseph Kipping’s more than 18 years of professional experience in the real estate, banking, and mortgage industries makes him uniquely knowledgeable in all facets of buying and selling properties. His experience in the mortgage industry working with Lendingtree.com clients served as the foundation for his true passion – serving his clients and community as a full-time Realtor. This dedication to his Tampa Bay clients has enabled Joe to sell more than 1,200+ homes in the Tampa Bay area since 2008. Referrals from past clients and repeat business have driven much of Joe’s success because his clients know that they will never see high-pressure sales tactics, marketing gimmicks or any unprofessional practices.

Buying a home is exciting, but it can also be overwhelming—especially when you hear news about rising or falling interest rates. Many buyers I talk to aren’t sure how rates actually affect them. That’s why I want to break down the three biggest ways interest rates impact your ability to buy a home, and how understanding them can help you make better decisions:

1. Interest rates affect your mortgage payments. When the Federal Reserve raises or lowers rates, mortgage lenders will also adjust their rates. Even small changes in interest rates can make a big difference in what you pay every month. For example, a 1% increase in your interest rate can add hundreds of dollars to your mortgage payment. This is why timing matters because it allows you to lock in a lower rate that can save you a lot over time.

On the other hand, when rates drop, your borrowing power goes up. This means you might qualify for a higher-priced home while keeping your payment within budget. Understanding how rates move gives you a real edge when it’s time to make an offer.

2. Interest rates affect home prices. Rates don’t just impact what you pay each month because they also affect home prices overall. When rates are low, more buyers will enter the market. This drives up demand and pushes prices higher, like we saw in 2021 and 2022. But when rates rise, fewer people can afford to buy and this slows down the market, helping keep prices in check.

If you’re hoping to avoid bidding wars or overpriced homes, shopping when rates are a bit higher might work in your favor. You’ll face less competition, and sellers may be more flexible.

3. Interest rates affect housing activity. Higher rates don’t just affect buyers—they affect sellers, too. Many homeowners choose not to move if they already have a low-rate mortgage. This limits how many homes are available, which can reduce your options. But when rates drop, more listings hit the market, which causes homes to sell faster.

Right now, we’re seeing more activity because rates have dropped slightly in the past 60 days. That’s bringing buyers back into the market, which means competition is growing again.

Interest rates may seem like just numbers, but they play a major role in your home-buying journey. If you’re not sure when to buy or how to plan around rates, feel free to call or text me at 813-321-4663 or email me at Info@TampaBayHome.com. I can help you walk through the options and figure out what makes the most sense for your situation.